Career CFO vents her frustration over business, human capital, economics, social environment, culture, politics, and everything else; but always with a monetary twist

June 2015 posts

June 29, 2015

Before I go any further let me first declare that I don't believe in abstract economic research. I never did. Even when I was working on my PhD, I concentrated on Applied Economics, developing large-scale cost models for the industrial sector.

Come to think of it, I don't believe in studies for the sake of "pure knowledge" in mathematics and the entire spectrum of natural sciences either. I think that the virtue of abstract thoughts is affordable only in Philosophy, her sister Poetry, and Fine Arts. After all, the creation of original ideas is the entire purpose of the imaginative process; and all it needs is one genius mind.

Yet, humans as a species are so fucking insecure and self-centered! They constantly need reassurance that they are smarter than they really are. So, they "study" everything there is because they simply "must know" and not because it can help our planet to survive or make a single thing better in this world. As a result, vast resources are spent on absolutely irrelevant bullshit and poor trees are cut down to bear endless dissertations, monograms, articles in fat journals, etc. Nobody, except the assigned reviewers, reads, and, more importantly, can possibly put to use any of that crap. I would like to ask these people, "So, you've discovered, dissected, and analyzed this. Now what?"

And that's assuming the actual "discovery" is made and proven, which is, as you can imagine, is not a frequent case.

Enters the graph above. My friend texted it to me. I stared at my phone's screen for two seconds and was like, "Hmm, this is fascinating!" Seeing that the graph was posted by Economist.com, I looked it up. It turned out to be a part of a "research" paperForbidden Fruits: The Political Economy of Science, Religion, and Growth (no less!) collectively conceived by a Princeton "scientist" and his two Italian colleagues out of the IMT Institute for Advanced Studies.

[FYI (so you don't have to look it up): IMT Institute for Advanced Studies is a research establishment and a graduate school located in Lucca, Italy. It primarily specializes in various branches of economic and computer sciences. Note, this is where Princeton and Italy's highest ranked institution for economic studies allocate their grants. I mean, right now!]

The paper was published by American National Bureau of Economic Research and, according to the Economist's note accompanying the graph, the authors explicitly claim to find "a strong negative correlation between innovation, as measured by patents, and religiosity, measured by the share of a population that self-identifies as religious."

Huh? What? Where? And WHY? Are you looking at your own graph, gentlemen? Well, I am. And if I had to focus my disbelief in just a few most problematic areas, I would have to holler:

1. How is this research in the subject of Economics? By definition, Economics as a branch of social science deals with structures and forces that drive production, distribution, and consumption of goods and services. While religiosity is definitely a factor in consumption patterns, innovations by themselves (especially the number of filed patents per capita) do not necessarily have direct or even indirect correlation with production and distribution. In fact, in isolation this statistic doesn't mean much at all. More on this below.

2. How did these people even come up with the idea for this research? With all social, political, and economic problems this world is facing, this was deemed crucial - to find if religious people can produce as many, more, or less patents as atheists? More importantly, what was the thesis? That religion is invariably bad for innovations and economic development? The commentary to the chart in The Economist states that "the authors do not claim to prove that religion causes an innovation deficit." No? Then why the said commentary is titled No Inspiration From Above? Such, liars! I think that's exactly what they were trying to show - that being religious stuns one's creativity; that every political leader who believes in God will force anti-scientific polices. Such unscientific absolutism! I wish I could ask them face to face: Do you know anything about the history of innovations? The majority of the greatest innovators from 1400's through early 20th century were believers of various degrees. Even the Man of Proof and Reason himself, Leonardo, did not deny God's existence.

3. Whatever cockamamie tangent cross-sectioned sub-sub-branch of science these narrow specialists are trying to plow, what were the purpose and application of this exercise? What were they trying to achieve with this research? How did they plan to impact the world? Let's assume for a second that they've found an undeniable inverse correlation between a country's religiosity and level of innovation. What's then? Cancel religion? Some countries already tried that, as students of history know. Agitate people to overthrow their governments for the sake of scientific progress? There are more important causes to start revolutions.

4. You realize, of course, that, in spite of the declining straight line, obnoxiously and arbitrarily drawn through the graph to force their point of view, these pseudo-scientists actually did not prove their preposterous thesis. There is nothing wrong with that per se, of course. The prevalent majority of well-financed research projects end in disproving the original theories and hypotheses. That's how science works. By its standards, negative results are just as important as absolute proves. The problem here is that these particular researchers lie to themselves believing that they came to a positive conclusion. Well, not to my eye.

According to the graph, the least religious country in the world (and the most populated), China, has the same number of patents per capita as the unspecified cluster of Central & Eastern European countries, whose overwhelming majority of citizens (over 95%) believe in God, and Iran (!). India (nearly 80% religiosity) and Vietnam (less than 40%) are on the same level of "innovation"; so are Egypt and Uruguay.

But, of course, the country that completely throws this bullshit study into garbage is the United States of America. Our patents rate is in the third place after Japan and South Korea (even I was surprised to see that we lead Germany and UK), while, judging by the high percentage of believers, our closest peer should've been Guatemala.

The truth is that if some diligent scientists actually wanted to model the major influences affecting, not innovativeness, which is too broad of a concept, but such specific parameter as the number of government-approved patents, they would have to consider an interwoven complex of factors: social and political structures, distribution of wealth, percentage of GDP re-invested into scientific research, specifics of university systems, extent of fundraising and philanthropy, the existence of entrepreneurial culture, economic mixture (particularly industrial vs. agricultural ratio), the percentage of people who can be motivated on the higher levels of Maslow hierarchy of needs, etc. And, of course, religiosity, but only as a part of the synthesis.

And one cannot ignore the mundane fact that in some of the sampled countries the patent laws are outdated and the processing bureaucracy is unmanageable. There might be thousands of applications in those countries that will not see the light of day for decades.

In all objectivity, though, I cannot dismiss this illustration as completely useless. As a compilation of data it piqued my curiosity about a few items of information.

The position of Russia on the chart, for example, shocked me - and not because of their closeness to France and Australia in the number of patents per person, but because of their level of religiosity. How the hell this country that spent 74 years exterminating God and his devotees with fire and blood, destroying 99% of places of worship and executing priests, rabbis, and imams like mad dogs, in just 24 years since the fall of the Soviet Union shot itself into the 75 percentile of population identifying themselves as religious?

By the way, all those patents registered in that country (a lot considering its population) mean absolutely nothing in terms of both macro and micro-economics. Russians are famous for inventing new stuff at their kitchen tables and building prototypes. None of it ends up in the production because everyone over there, including the entire government, lives for a quick buck, not long-term investment of resources.

Another thing that kept teasing my attention was the apparent strong potential for innovative achievement in the US; and that despite the pervasive nepotism and escalating irrelevance of merit. Can you imagine what we could've accomplished here if we continued to uphold the fundamental principles of the original American Dream ethos?

June 23, 2015

Generally speaking, all benchmarking techniques can be defined as ranking of a process or a product against another process or a product with similar specific metrics of known values. Financial benchmarking in particular focuses on the comparison of the financial results with a purpose of assessing overall competitiveness and productivity. The beauty of this research tool is in its potential to uncover some underlying reasons behind the comparative results.

While it's difficult (yet not impossible) to apply generic correlative methodologies to such subjective, ambiguously immeasurable, and predominantly qualitative characteristics as artistic values of cinematic products, fiscal aspects of the movie-making are not only comparable (as previously outlined in Arts & Entertainment by the Numbers III), at this point they are the chief driving force behind the big-screen output. It's that competitiveness, y'all! "C.r.e.a.m get the money. Dolla Dolla bill y'all."

Let's not forget that financial results are accounting reflections of the micro-economic patterns of supply and demand. Movies, being consumer products, specifically depend on the behavior of the consumer market; even more categorically - on the tastes of the viewing audience.

With that in mind, I would like to sketch out a simplified financial benchmarking exercise based on the most recent installments of two movie franchises (identical products competing in the same markets) that came out on the same day, 05/15/15 (another identical metric) - Mad Max: Fury Road(a terrifyingly believable upgrade of the post-apocalyptic high-octane series with Tom Hardy, Charlize Theron, and Nicholas Hoult) and Pitch Perfect 2 (a hard-to-believe Cinderella-type contemporary chick-flick-with-singing about an a capella group on the road to stardom with Anna Kendrick, Rebel Wilson, and Elizabeth Banks; the latter also produced and directed).

Mad Max opened on more screens: 3702 vs. 3473, yet Pitch Perfect 2 made $69.2 million (230% of its rumored $30 mil budget) during the opening weekend - $23.8 mil more than Mad Max whose $45.4 mil barely returned 30% of its $150 mil budget. Here, in our blessed USA, the fiscal gap between the two movies keeps only expanding: As of yesterday, MadMax's domestic gross ($143 mil) was already trailing Pitch Perfect 2's by $34 mil.

Numbers don't lie: A handful of them is all we need to clearly show that American general public prefers to see a movie full of inexplicable plot turns and dialogue pearls akin to

"Fat Amy: Listen, I don't want you guys to fight. You're Beca and Chloe, together you're Bhloe and everyone loves a good Bhloe."

instead of taking a hard and honest look at the future that already awaits us around the proverbial corner, notwithstanding the high cinematic standards, tight script, awesome directions in all divisions of the process, and NO CGI (!!!)

Of course, making back multiples of the budget and fattening the pockets of producers and distributers pretty much guaranteed Pitch Perfect 3, which is already set to be released in 2017. On the other hand, if people behind Mad Max: Fury Road had to rely only on the US distribution, the $7 mil deficit would pretty much kill all the chances for the filming of the next installment - Mad Max: The Wasteland. Thankfully, there are international distribution channels.

And overseas results are quite opposite to what we observe here at home. The universal appeal of Mad Max's sci-fi realism yielded the film $202.5 mil of foreign revenues, making the total box office as of yesterday $346.10 mil.

On the other hand, I can't even imagine how translators deal with that Bhloe crap in the subtitles. So, it is not surprising that Pitch Perfect 2 made only $94.5 mil outside of US, with 51% of that coming from English-speaking countries of UK, Australia, New Zealand, and the Netherlands. In many countries the movie stayed in the theaters only for the opening weekend. As the result, its worldwide box office now totals $272 mil, or $74.1 mil less than its competitor in this example.

That's gross, of course. Nowadays, it's hard to overcome a $120 mil budgetary differential. Thus, the singing chicks are still $46K more profitable than the depiction of our damaged Planet and her marred inhabitants.

One can argue that today $150 mil worth of resources is too high of a price for any movie, good or bad. And I agree, but spending any resources at all over and over again on crap that furthers the process of human degeneration is simply criminal.

June 16, 2015

"They are... part of a global conspiracy; a shadow organization that spans across every continent and has for the last three decades; consisting of leaders in world governments and the private sector. Some call this group the Cabal. The world you live in is the world they want you to think you live in. They start wars; create chaos; and, when it suits them, they resolve it. Cabal members will move more money in the next quarter than the World Bank will in the next year. Their alliance affects a sea of change in every aspects of human life. The value and distribution of commodities, money, weapons, water, fuel, the food we eat to live, the information we rely on to tell us who we are."

TheBlacklist, episode 2.22

Written by John Eisendrath and Jon Bokenkamp

The Frustrated CFO's Note (to explain the post's title):It's impossible for an intelligent person to take the action-packed storytelling about spies and secret agents at face value, even if the writers manage to sneak in ideas and opinions that resonate with one's own political, social, and world views, which frequently happens on The Blacklist. The very basis of a good thriller about things that are "known only to a few" is that shit is mostly made up. Luc Besson once said that La Femme Nikitaand Leon: The Professional were as much sci-fi creations as The Fifth Element. What pushed The Blacklist into the shenanigans territory for me was the recycling of the "unknowing daughter of the KGB agent-mother" plot turn. I guess it's difficult for J.R. Orci to shake off the Alias baggage.

June 11, 2015

If you can stomach the naked truth about the world we live in, about your surroundings and yourself; if you are ready to actually see a clear depiction of the pile of unbearable scum that the human species has become, watch Black Mirror. Pay attention and look hard - it reflects Homo Technologiae and its self-made surroundings at its realest.

And for those who don't look at the world through the pink glasses of delusional denial, what a joy to know that there is Charlie Brooker and his cohorts at Zeppotron! What a gratifying experience to realize that there are like-minded people out there!

Thank you, to everyone who has been working on this reality-fiction anthology and to those at Channel 4 responsible for its distribution. And special thanks to the executives at Netflix who are continuously bringing narrow-niche products like this to their 60 million global subscribers.

It has been reported that the show is a big success in the US. Well, I don't know if everyone understands that they are looking at their own reflections. Nevertheless, this gives us a shred of hope, doesn't it?

June 10, 2015

One of the walls in the lobby of the building where my office is located is entirely covered by multiple monitors. Together they work as one giant HD screen. This is what techies call a video wall. To the best of my knowledge its primary feed is CNBC.

Most days when I leave the office I see in passing Jim Cramer still going Mad about Money. But today I had to leave a little earlier and the only money manager ever to tell the general public not to use their retirement and college funds for stock-market speculations wasn't on yet.

I have no idea what was on, but from the corner of my eye I saw flashing on the screen

A few weeks ago, this young artist I know went to a party - a sort of a mingling of, let's say (trying to be as vague as possible), people in creative fields. Afterwards, I asked her how it went and the first thing that I got back was actually a rhetorical question: "Why do people suck so bad at organizing things?"

Turns out the party was arranged by a couple of guys who were "minglers" themselves and volunteered to spearhead the process; apparently, with an unsatisfactory result. I can hear some of my readers saying with all-knowing intonations, "This is why you outsource to professional event-planners or employ support staffers with event-organizing responsibilities."

And they are correct. I rarely go to parties myself, but the last two I attended were a huge Gala (over 700 people) and a small Gala (250 people). The former was put together by a "big-name" event-planning firm and the latter by the event chairman's personal assistant. Well, those were pretty large affairs with complicated programs and minor celebrities in attendance. But a regular cocktail and/or dinner party?

To tell you the truth, every time people start calling expensive coordinators to manage some itty-bitty occasion I have the same mental image: Steve Martin's remade father of the bride questioning his wife (Diane Keaton) on why two people who successfully run independent businesses need any help in putting together a wedding; let alone help of some guy with an unidentifiable accent (Martin Short) and his smug assistant (BD Wong, which is uncanny, cause he was one of the celebrity guests at that big gala I mentioned above).

You probably think, "Why don't you try it yourself?" So, let me assure you that I do have experience of rolling up my sleeves and stepping into party-planning when nobody else around is up to the task; most recently for a celebratory corporate festivity for my company with 80 guests. And, yes, I am a control freak (at least I admit it) and sometimes it is a contributing factor into my taking charge of things, but honestly it was either doing it myself or wasting thousands of dollars on outsourcing.

Let me remind you that I am a career CFO with multiple interests - I don't do parties, professionally or as a hobby. Yet, 18 months later people are still talking about it. And I promise you I didn't do anything out of the ordinary - I simply approached the problem in a logical and systematic way. That was the very reason the project fell into my lap in the first place - people always rely on my common sense.

But that's a rare commodity nowadays, common sense, isn't it? And the lack of it causes the trend of ultra-narrow specialization we observe today. I am not surprised at all that those artistic types couldn't organize a decent party. Haven't you noticed? The majority of people around you are good primarily at one thing (if they are good at anything at all): performing their paying jobs, or looking pretty, or being social, or shopping, or cooking. A person who is "good with people," usually sucks with numbers. The hard-working breadwinners are mostly useless in their households. Overwhelming number of people don't even have hobbies these days. And those with fun-and-leisure faves are too preoccupied to do well at work.

And don't even get me started on the narrow professional specialization cultivated by headhunters and HR specialists too limited to comprehend the concept of adaptable competence! They perverted the idea of "transferable skills" into exact matches of specific employment in a specific type of company of a specific industry. Instead of assessing whether an applicant is capable of applying his expertise to ANY business situation they go through a checklist of specialized tasks. You may be the strongest professional they've ever met, but if you don't collect enough check marks on the roster of narrowly defined projects, you will not be considered.

How can we be surprised then that people are losing their capacity for systematic thinking both at work and life when they are stuck doing the same shit over and over again? I'll tell you a secret: I never hire anybody whose resume shows 20 or even 10 years of static employment, no matter how "prestigious" it is. Adaptability is one of my top 10 key factors of the value assessment. I like my Renaissance people!

The scary level of targeted specialization we have reached at this point is not evolutionary or revolutionary; and it's not economically beneficial and "progressive." This is the aftermath of the intellectual (and physical) laziness that spreads into larger and larger segments of the general population like a pandemic. The spoiled brats from all kinds of walks of life don't want to do elementary things themselves; they demand to be served, and, the shrinking minority of enterprising people take the opportunity to supply such services - the natural laws of supply and demand are still struggling against nothingness.

On the opposite side from the utmost lethargy, but causing exactly the same regressively narrow results, is the other extreme - that glorified "focus" on your job and the job only. Well, mental health specialists define the intense preoccupation with a narrow subject or activity as one of the main characteristics of Asperger syndrome. And that's a mental disorder!

Evolutionary speaking, we were never supposed to be this labor-differentiated, because diverting the responsibilities for all your needs to others humans undercuts your personal chance for survival. I am not talking pro-level pilotage in every task of life, of course, but there is basic shit you should be able to do yourself!

And yes, that includes coordinating a simple gathering of people to everyone's satisfaction if the need arises. I am not saying "Met Gala" with spectacular celebrities, but an ordinary function for 100 regular schmucks should be pretty manageable.

The same goes, as another example, for vacation planning. One should be capable of tailoring his own decent vacation without paying for some generic package thrown together by an absent-minded leisure-industry professional who knows nothing about you and your companions.

And you should be able to make your place of residence livable without paying $300K fees to a "professional decorator" who will additionally charge you $50K for each made-in-China table lamp that you can buy at Lamp Warehouse in Brooklyn for $3K. I am not saying Architectural Digest spreads, just a tasteful arrangement of furniture and some tchotchkes that make you feel at home.

And there is no need to call a handyman for bulb-changing, or picture-hanging, or installing a new toilet seat. Unless, of course, it's a multifunctional state-of-the-art accessory that you've got yourself from Japan via Amazon. I am not talking about using dangerous power tools to carve a brand-new lock into your door either - such types of amateur endeavors are reserved for very special people, but at least buy yourself a screwdriver.

And I am sorry, mathematically challenged people, but it is not funny anymore that you cannot (and don't want to) balance your checkbooks. In the age of electronic payments, smart-phone deposits, massive hacking attacks, and readily available devices that can remotely override the security of every plastic item in your wallet, it is really dangerous not to reconcile your cash ins and outs with the bank records. It's not a goddamned Newton's binomial theorem either! Just pure arithmetic!

And green thumb or not, one should be able to plant a seed and tend to it with sufficient care and persistence until it flowers or bears fruit. Nobody is expecting award-winning roses and pluots here, but carrots, tomatoes, and onions can be managed by a child.

And not being able to cook a simple meal for yourself? That's just pathetic! What the hell are you going to do in the absence of the online orders and take-outs? Chew raw pasta?

Yet, we hear all around us:

"I am totally retarded when it comes to cooking. I can't even boil an egg!"

Or, "I wouldn't be able to sew a button to save my life!"

That "save my life" turn of phrase is not accidental, by the way. The day may come when it can have a very literal meaning.

June 02, 2015

"Art is dead," declares Amy Poehler's hilariously delirious Art Dealer character in Old Navy commercial. (No, I'm not quoting the Old Navy ad.)

"Culture is dead," I acknowledged the other day, heart aching.

"Except for TV," I got in reply.

Yes, TV (and here I include all of its forms - commercial broadcast, basic and premium cable/satellite, as well as streaming media) is the last place where NEW cultural achievements of quality still occur. With their installment-based capital risks and an ability to get out of ventures at any time, television productions can afford to cater to narrower slivers of potential viewing audience and undertake some seriously daring creative leaps. The extended storytelling real estate is also a plus. As a result, TV has been attracting great writers, famous directors, and an array of first-class actors for the sake of producing great (some even better than great) entertainment of superior cultural value (in comparison to the slush all other contemporary arts and entertainments churn up).

However, there is a problem: The creators are in a permanent face-off with the collective mind of hundreds of thousands viewers fused together through the numerous social network outlets. In isolation, average members of the TV audience can be kept engaged, surprised, and wondering by watching the lives of their beloved characters unfold at a regular pace; but as a multi-headed guessing and predicting monster they need more, much more. It's harder to keep the interconnected viewing machine hooked without sacrificing the storytelling quality; and by upping the ante, many shows (not all, of course - see my collage for reference) are running the danger of either pushing themselves into a treacherous territory of nonsensical and forgettable ridiculousness or of running completely out of steam.

And it's not just me who sees the potentially suffocating aftermath of this trend. Now, the quote (finally):

"The newest, hottest TV-storytelling model is all about fan service, and it throws so much plot at viewers that the result sometimes recalls that old video game of the firefighter rushing up and down a sidewalk, catching falling babies in a basket."